Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103384
Authors: 
Kassenboehmer, Sonja C.
Schatz, Sonja G.
Year of Publication: 
2014
Series/Report no.: 
SOEPPapers on Multidisciplinary Panel Data Research 697
Abstract: 
Using a nationally representative panel dataset, this study investigates the extent and impact of systematic misconceptions of the currently unemployed concerning their statistical re-employment probability, affecting their labor market behavior in a sub-optimal way. Specifically, people with unemployment experience of 3 to 5 years significantly underestimate their objective re-employment probabilities as determined by the econometrician's all-seeing "Eye of Providence". Simply having information concerning the individuals' previous unemployment experience is sufficient to make more accurate predictions than the individuals themselves. People who underestimate their re-employment probability are less likely to search actively for a job and indeed more likely to exit the labor force. If re-employed, they are more likely to accept lower wages, work fewer hours, work part-time and experience lower levels of job satisfaction. This information can be used by employment agency case workers to counsel clients better and prevent client adverse behavior and outcomes.
Subjects: 
Job Insecurity
Re-employment Expectations
Prediction Errors
JEL: 
J64
J01
D84
Document Type: 
Working Paper

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